Significant Prosecutive Actions
Resulting from OIG Investigations
(October 1, 1994 March 31, 1995)
School Owners and Officials
Southern College
Rock Hill, South Carolina
Bessemer City and Gastonia, North Carolina
Ronald Royce Reed, vice president in charge of operations
Ronald Royce Reed, former vice president in charge of operations for Southern College, a for-profit proprietary school,
was sentenced to serve six months home detention with electronic monitoring and was ordered to complete a three-year
period of probation, pay $40,000 in restitution to ED and tender a special assessment of $25 to the court, after pleading
guilty to misapplying Federal student aid funds. Reed was indicted by a Federal grand jury in December 1993. He ceased
operations at Southern College and filed for bankruptcy several months prior to his indictment.
Invesco Inc.
Little Rock, Arkansas
Perry L. Turnbull, owner and president
Perry L. Turnbull, owner and president of Invesco Inc., a/k/a Capital City Junior College (CCJC), was sentenced in the
Eastern District of Arkansas to serve four months electronically monitored home detention and three years probation, and
was ordered to perform 30 weeks of community service and to pay a special assessment of $50. The sentence followed
Turnbull's plea of guilty to a one-count criminal information charging him with making false statements. The above
actions were the result of a joint OIG/Office of Student Financial Assistance (OSFA) investigation into an Invesco officer's
allegation that Turnbull was submitting false evidence of compliance with the terms of an August 1990 bankruptcy
settlement agreement.
Midland Career Institute
Los Angeles, California
Neil Sanders, owner/director
Neil Sanders, owner/director of Midland Career Institute, pled no contest in Los Angeles Superior Court to conspiracy
and obstructing or hindering collection of revenue. Sanders was placed on three years probation and was ordered to pay
$200 restitution and to complete 1,000 hours of community service. He was also ordered to pay $10,000 to the
Department of Education and $10,000 to the Department of Justice. An OIG investigation determined that Sanders
instructed employees to alter ledger cards to reflect that refunds were made, when in fact they were not, and/or to make
it appear that refunds were made at an earlier date. In addition, Sanders drew down Pell Grant funds in the amount of
$27,000 to which he was not entitled.
Bailie School of Broadcast
Seattle, Washington
Ronald Bailie, president
Ronald Bailie, radio personality and president of Bailie School of Broadcast, was convicted of nine counts of em-
bezzlement, false statements, and criminal conspiracy following a two-week trial in Federal District Court in Seattle.
Bailie's wife, Nada, and daughter, Terri, were also convicted.
The case arose out of the Bailies' operation of the Bailie School of Broadcast in the late 1980s. An OIG investigation
revealed that, between 1988 and 1990 (the last full year of operation for the Bailie School), Ron Bailie, Nada Bailie and
Terri Bailie embezzled approximately $270,000 from the school's Perkins Loan accounts and falsified financial reports
required by ED attesting to the amount of Perkins Loan funds on hand.
Dorothy Aristone School
Maple Shade, New Jersey
Dorothy Aristone, president
Dorothy Aristone, former president of the now defunct Dorothy Aristone School, pled guilty in the District of New Jersey
to count three of a seven-count indictment which charged Aristone with making false statements in order to receive Pell
Grant funds. A joint investigation by OIG, OSFA and the Federal Bureau of Investigation (FBI) found evidence that
Aristone falsified attendance hours in order to justify receipt of student aid funds.
School Employees
Philip G. Faden, consultant
Hollywood Beauty College and Salt Lake CitiCollege
Salt Lake City, Utah
Philip G. Faden, a consultant to Hollywood Beauty College and Salt Lake CitiCollege, was sentenced in the District of
Utah to 12 months in prison and ordered to pay restitution of $293,142 after pleading guilty to one count of wire fraud.
Faden admitted developing a "scheme and artifice" to defraud the Department of Education of thousands of dollars in Pell
Grant funds.
An OIG investigation disclosed that Faden, against Department regulations, instructed that Pell funds be drawn down
without having any students eligible for the funds. He also failed to make refunds to students' accounts, instructing
subordinates to prepare documents for placement in financial aid files giving the appearance that refund checks had been
paid on behalf of the students. In fact, Faden would not permit the checks to be mailed to lenders.
Keith Hebert, employee
Technical Training Institute
Houston, Texas
Keith Hebert, former employee at Technical Training Institute (TTI), was sentenced in the Southern District of Texas to
serve 15 months in prison and 3 years supervised release and was ordered to make restitution of $26,000. A joint
OIG/FBI investigation disclosed that Hebert, whose father owns TTI, forged student signatures on guaranteed student loan
(GSL) checks, authorized the deposit of unearned Pell Grant checks into TTI's operating account, and kited funds between
the Pell account and the operating account to create the illusion that refunds were being made for students who had ceased
attending. Hebert also withdrew over $26,000 from the operating account to purchase a certified check, which was used
to purchase a BMW convertible.
The investigation was initiated based on an ongoing OIG audit of ITT. The audit disclosed that between December 1989
and May 1991, approximately $260,000 in Pell Grant and GSL funds was transferred out of the Pell account or retained
by TTI for students who were not in school and were therefore ineligible for the funds.
Zoraida Rosa, accounting assistant
Hostos Community College
Bronx, New York
Zoraida Rosa and Diego Rivera were each sentenced in Bronx Supreme Court to serve five years probation, and were
ordered to pay a total of $58,000 in restitution, to give 200 hours of community service, and to give a full financial
disclosure and a confession-of-judgment agreement. Rosa, a former accounting assistant at Hostos Community College,
and Rivera, her husband, pled guilty to one count of grand larceny in the second degree after investigators found evidence
that Rosa and Rivera negotiated more than 300 tuition refund checks, some of them written to fictitious students.
Deanna M. Ortega, financial aid officer
National Education Center
Los Angeles, California
Deanna M. Ortega, a former financial aid officer at National Educational Center (NEC), was sentenced in the Superior
Court of California, County of Los Angeles, to five years probation and ordered to pay $25,000 in restitution and pay a
fine of $200. An OIG investigation disclosed that Ortega certified 14 SFA applications for herself, her husband and her
two brothers, who never were enrolled in or attended NEC and were therefore ineligible to receive $38,250 in Federal
funds.
David Daniel Freeman, Jr.
Activity One Director, Title III Programs
Shelton State Community College
Tuscaloosa, Alabama
David Daniel Freeman, Jr., former Activity One Director, Title III Programs, Shelton State Community College, was
indicted in the Northern District of Alabama on four counts of misapplying Title III, Strengthening Institutions program
funds and three counts of making false statements to the United States. Mr. Freeman is currently the chief development
officer and dean of external affairs at Shelton State. The indictment is a result of a joint OIG/FBI investigation into alleged
falsification of travel vouchers by Freeman and payment of consultants for fraudulent claims.
Alda Elaine Spraggins, financial aid officer
Transwestern Institute of Word Processing
Los Angeles, California
Alda Elaine Spraggins, former financial aid officer at Transwestern Institute of Word Processing, was sentenced in the
Central District of California to five months incarceration and five months home detention, was placed on three years
probation, and was ordered to pay $24,106 in restitution and a special assessment fee of $150. An OIG investigation
revealed that Spraggins had stolen government property and used bogus student names and false Social Security numbers
(SSNs) to receive government funds for personal use.
Walter Marroquin, employee
Hostos Community College
Bronx, New York
Walter Marroquin was sentenced in Bronx Superior Court, New York, to five years probation for second-degree grand
larceny and ordered to pay $63,000 in restitution. Marroquin was a former Hostos Community College employee. An
OIG investigation revealed that Marroquin and three others embezzled tuition refund checks issued to fictitious students
at Hostos Community College.
Other Investigative Cases
Robert T. Wise, accounting clerk
Gruber, Tanzey & Casey
Columbia, Missouri
Robert T. Wise, an accounting clerk at the public accounting firm of Gruber, Tanzey & Casey, was sentenced to five years
in Federal prison after pleading guilty in State court to three felony counts of stealing. A joint OIG, FBI, Internal Revenue
Service (IRS) and Columbia police department investigation developed evidence that Wise embezzled funds from the
Services for Independent Living (SIL), a private, non-profit agency that provides comprehensive independent living
services to severely disabled persons in a nine-county mid-Missouri area.
SIL hired Gruber, Tanzey & Casey to provide accounting services, including disbursement of funds from SIL bank
accounts. Wise was responsible for managing the SIL account. The investigation disclosed that from approximately
October 1993 to March 1995, Wise fraudulently prepared approximately 107 checks totaling $167,288 in the name of
his wife, Roberta Gerlach, and deposited the funds into a joint bank account.
R. Jerrold Gibson, president;
Nathan Gibson, executive vice president
University Loan Services
Cambridge, Massachusetts
R. Jerrold Gibson, former president of University Loan Services (ULS), and his son, Nathan Gibson, former executive
vice president of ULS, pled guilty in the District of Massachusetts to 70 felony counts involving the fraudulent submission
of $196,879 in default claims to the Massachusetts guaranty agency. ULS was a corporation engaged in the business of
servicing student loans on behalf of FFEL lenders. An OIG investigation found evidence that the default claims in
question contained false data and representations relating to ULS's loan collection activity.
Michael Boyd
Cleveland, Ohio
Michael Boyd was indicted in the Northern Judicial District of Ohio on charges of mail fraud and SFA fraud. A joint
OIG/Postal Inspection Service investigation developed evidence that Boyd fraudulently received over $140,000 in GSLs
while claiming to be a foreign medical student in the Dominican Republic. Boyd allegedly used multiple SSNs, failed
to disclose prior defaults and forged school officials' signatures on at least 30 student loan applications. School officials
verified that Boyd initially attended the school but dropped out during the second year. Boyd allegedly continued to
generate and submit fraudulent applications for at least three years after attending the school. A local crime stoppers
television program shown in Cleveland apparently persuaded Boyd to turn himself in to the U.S. Marshals Service lockup
in Cleveland.
Kim Dix Thomson and James Klug
Terre Haute, Indiana
Kim Dix Thomson pled guilty in Vigo County Superior Court, Terre Haute, Indiana, to one felony count of welfare fraud.
A joint investigation by OIG special agents and Indiana State University (ISU) police disclosed that Thomson, a Terre
Haute businessman, paid James Klug $1,000 to complete Thomson's degree at ISU. Thomson also authorized Klug to
use his (Thomson's) name and SSN to obtain over $10,000 in Title IV funds to pay the cost of the degree.
Klug pled guilty to one felony count of welfare fraud and four felony counts of theft. He was sentenced to four years of
supervised probation, and was ordered to pay $13,945 in restitution and perform 300 hours of community service tutoring
troubled juveniles.
Illegal aliens
Los Angeles, California
Nine individuals arrested on charges of perjury, grand theft and attempted grand theft entered the following pleas: One
pled guilty to perjury; three pled guilty to grand theft; and five pled no contest to grand theft. A joint investigation by the
OIG, the Social Security Administration, the Immigration and Naturalization Service, the California Student Aid
Commission and the California State Police found evidence that the subjects fraudulently obtained over $60,600 and
attempted to obtain an additional $6,200 in SFA by claiming to be U.S. citizens at two colleges in the Los Angeles area.
Investigation revealed that the majority of the individuals were in the United States illegally when they obtained the loans
and grants and were therefore ineligible to receive them.
Sheila Davis
Wilberforce, Ohio
Sheila Davis, a/k/a Sheila Davis Webster, pled guilty in the Southern District of Ohio to two counts of student aid fraud.
Our investigation found evidence that Davis had fraudulently submitted 14 PLUS loan applications while attending
Central State University in Wilberforce, Ohio. In addition to using her own name, Davis also used the names of her
mother, father, brother and boyfriend on the applications to obtain the loans. Davis's scheme netted her approximately
$42,200 in PLUS loan funds.
Jerry Irvin
Fort Wayne, Indiana
Jerry Irvin pled guilty in the Northern District of Indiana to one count of a two-count information charging him with
student aid fraud. A joint OIG/Postal Inspection Service investigation revealed that Irvin had fraudulently received over
$25,000 in guaranteed student loans and Pell grants by concealing a prior defaulted student loan.
Alan C. Wilson
Detroit, Michigan
Alan C. Wilson was sentenced in the Eastern District of Michigan to 13 months incarceration and 3 years supervised
release and was ordered to pay $18,058 in restitution for his involvement in obtaining illegal Pell Grant and GSL funds.
The court also ordered Wilson to be employed full time after his release from prison. Our investigation revealed that
Wilson fraudulently obtained Federal funds by using false SSNs and aliases.
South Dakota Project
This investigative project was initiated to investigate student borrowers who had previously defaulted on Title IV,
Federally insured student loans, and had subsequently obtained additional Title IV funds within a specific geographic area,
primarily South Dakota. The three cases listed below are recent successful prosecutions under this project.
James Sattler, Rapid City, was sentenced in the District of South Dakota to serve 30 days in a halfway house, was
placed on 2 years probation, and was ordered to pay $1,600 in restitution and a $50 special assessment fee. Sattler
was charged with one count of making false statements on a student loan application.
Andre Z. Cech, Sioux Falls, was sentenced in U.S. District Court, District of South Dakota, to six months
incarceration and three years probation and was ordered to pay $1,440 in restitution and a $50 special assessment
fee after being convicted of one count of making false statements on a student loan application.
Debra Wullstein, Rapid City, was sentenced in the Northern District of South Dakota to two years probation and
was ordered to pay $585 in restitution and fined $50. Wullstein was charged with one count of making false
statements on a student loan application. An OIG investigation found evidence that Wullstein falsified both her
1990-91 Student Aid Report and her Stafford Guaranteed Student Loan application by falsely stating that she had
never defaulted on a student loan.
UPDATE on Previously Reported Cases
Erik Richards
New York, New York
Erik Richards was sentenced in the Southern District of New York to 35 months in prison followed by 36 months
probation after pleading guilty to a one-count felony charging fraudulent submission of $494,475 in student loan
applications for attendance at Caribbean medical schools. Investigators found evidence that Richards, a Nigerian national,
had submitted false applications totaling $970,000. Richards also pled guilty to making false statements claiming U.S.
citizenship on a passport application. (Semiannual Report No. 30, page 31)
Stevens Point Central Beauty Academy
Stevens Point, Wisconsin
Judith Hentges, owner
Judith Hentges, former owner of Stevens Point Central Beauty Academy, was sentenced in the Western District of
Wisconsin to two and one-half years in Federal prison and was ordered to pay $58,563 in restitution for illegally obtaining
Federal Pell Grant and GSL funds. An OIG investigation revealed that Hentges had fraudulently obtained Pell Grant
funds, for her use and the use of others, in the names of individuals who were never enrolled at the school.
At the sentencing, the judge stated that Hentges had abused a position of public trust and that she still did not accept
responsibility for making criminal decisions when she stole the Federal funds. The judge added that Hentges' actions
injured all Federal financial aid recipients and participating educational institutions by undercutting public and
Congressional faith in the programs. (Semiannual Report No. 30, page 28)
Jerome Royal, recruiter/financial aid officer
in connection with
Andover Tractor Trailer School
Methuen, Massachusetts
Jerome Royal was sentenced in the District of Boston to 27 months incarceration based upon his conviction for conspiracy
and mail fraud. Royal was also ordered to pay restitution of $30,000 and to complete three years of supervised probation
upon release from prison.
Royal's conviction was based upon his acts while employed at the now defunct Andover Tractor Trailer School.
Investigation disclosed that Royal, who was employed as a recruiter on behalf of Andover, engaged in various fraudulent
schemes in the enrollment of students for Andover home-study programs. (Semiannual Report No. 30, page 36)
Quality Plus, Inc.
Atlanta, Georgia
Kathleen Bacon Miller, president;
Barak Miller, financial aid officer
Kathleen Bacon Miller, president of Quality Plus, Inc., and her husband, Barak Miller, the school's financial aid officer,
were sentenced in U.S. District Court, Atlanta, Georgia. A joint investigation by OIG, the Department of Labor and the
Georgia Department of Labor developed evidence that the Millers fraudulently collected Pell Grant funds for students who
were not entitled to receive them; filed false reports with ED on behalf of the school; and failed to make appropriate
repayments to the Department for outstanding refund obligations. Additional evidence was developed concerning fraud
allegedly perpetrated by the Millers with Job Training Partnership Act funds.
Kathleen Bacon Miller was sentenced to one year and nine months imprisonment, to be followed by three years supervised
release. Barak Miller was sentenced to one year of imprisonment to be followed by three years supervised release. In
addition to the prison terms, the Millers were ordered to pay restitution of $111,910, jointly and severally, to the
Department of Education; to pay a $100 special assessment; and to perform 200 hours of community service. Kathleen
Bacon Miller was also ordered to pay restitution in the amount of $42,754 to the Department of Labor. (Semiannual
Reports No. 30, page 35 and No. 29, page 22)
American Truck Driving School of Texas
Elm Mott, Texas
Richard Kirby Crane, owner/operator
Lucy Alice Ingraham, secretary/treasurer/financial aid director
Lucy Ingraham entered a plea of guilty on behalf of American Truck Driving School of Texas, Inc. (ATDS), Waco, Texas,
to charges of obstruction of a Federal audit and aiding and abetting. In exchange for the plea, in which ATDS agreed to
pay a fine of $100,000 and make restitution of $1,200,000, the U.S. Attorney agreed to dismiss the original indictment
and the remaining counts of the superseding indictment at the time of sentencing. A three-year investigation by Federal
agents and auditors revealed that Richard Crane, while operating ATDS, intentionally failed to refund federally insured
student loan proceeds totaling approximately $2,600,000.
Crane, Ingraham and seven corporations were originally charged in November 1994 in a 39-count sealed indictment.
They were charged in July 1995, in a 43-count superseding indictment, with mail fraud, conspiracy to defraud the United
States government, obstructing a Federal audit, false statements, money laundering, aiding and abetting, conspiracy to
defraud the government with respect to claims, and false claims against the United States. (Semiannual Report No. 30,
page 28)
Ligons Cosmetology College
Corinthin, Mississippi
J.C. Calton, owner
J.C. Calton was sentenced in the Northern District of Mississippi to five years probation and six months home detention,
fined $900 and ordered to make restitution of $5,000. The sentencing is a result of Calton's earlier plea of guilty to one
count of student aid fraud and one count of aiding and abetting.
Calton is the former owner of five cosmetology schools in Northern Mississippi and Western Tennessee. His sister,
Ophelia Sanders, was sentenced to three years probation and three months home detention and was fined $400 after
pleading guilty to one count of misprision of a felony. The convictions were the result of an OIG investigation that
uncovered a scheme by Calton, Sanders and other individuals to defraud the Department of Education by concealing and
removing records relating to Pell Grant awards given to students at two of Calton's ineligible schools. (Semiannual Report
No. 30, page 29)
Advance Business College
Aguada, Puerto Rico
Gerardo Tirado Torres, owner
In the conclusion of a 43-month joint OIG/FBI criminal and civil investigation, a Federal judge in Puerto Rico ordered
Gerardo Tirado Torres, owner of Advance Business College (ABC), to forfeit to the U.S. government two pieces of real
property located in Aguada and Aguadilla, Puerto Rico, and $60,000 in U.S. currency. Investigation disclosed that Tirado
Torres requested funds for students enrolled in four ineligible branch campuses of ABC and used over $3.3 million in Pell
Grant funds to purchase real estate and expensive vehicles and to pay lucrative salaries to two individuals who participated
in the scheme. (Semiannual Report No. 27, page 27)
American Career Training Corporation
Pompano Beach, Florida
James Calareso and Joseph Calareso, owners
A summary judgment in favor of the United States was entered against American Career Training Corporation (ACT),
Pompano Beach, Florida, in the amount of $9,494,224. The judgment was a result of ACT's failure to implement
regulations for institutional refunds and repayments from February 3, 1988 through August 14, 1989. However, the
judgment does allow ACT to credit any amount recovered by the United States from ACT's former owners, James and
Joseph Calareso.
A summary judgment in favor of the United States was also entered against James and Joseph Calareso, jointly and
severally, in the amount of $3,532,332 for unjust enrichment during that same period. (Semiannual Report No. 29, page
25)
Walker Education Center
Detroit, Michigan
An OIG investigation revealed that Walker Education Center was a business set up solely to falsify the Pell Grant
applications of college students. Mack Walker, the Center's owner, and Ethel Durr, his assistant, were sentenced to prison
terms during the previous reporting period for their role in running the Center.
As of the end of this reporting period, 49 individuals have signed pre-trial diversion agreements and promissory notes
totaling $537,735 with the Department of Justice. A total of 80 individuals will receive pre-trial diversions for their part
in receiving approximately $864,000 in fraudulent SFA funds by providing false income information on student financial
aid forms and submitting bogus tax returns. An additional 33 individuals will be processed through the Affirmative Civil
Enforcement program. Those individuals received approximately $230,000 in fraudulent grant funds. (Semiannual
Report No. 30, page 34)
John E. Nibo
San Diego, California
John Nibo pled guilty to four counts of SFA fraud in the Southern District of California. He was placed on three years
probation and ordered to pay restitution in the amount of $35,500. Nibo had previously attended a school where he
obtained financial aid and defaulted on the loan. Nibo later used variations of his name and applied for Social Security
numbers to obtain additional loans at schools he was attending in Southern California. (Semiannual Report No. 30, page
32)
Bradley Kesner and Tommy Lee, directors of admissions;
Susan Hooks and Laura Ross, financial aid directors;
Melissa Jansen and Tiki Johnson, employees;
John Neal Davis, admissions representative
Edmondson Junior College
Nashville, Tennessee
Six former employees of Edmondson Junior College were sentenced in the Federal District Court for the Middle District
of Tennessee after pleading guilty to one count each of conspiracy to defraud the United States.
Bradley Kesner, former director of admissions, was sentenced to six months incarceration, four months home
detention and two years supervised release, and was ordered to pay $30,000 in restitution.
Tommy Lee, also a former director of admissions, was sentenced to five years probation and nine months home
detention, and ordered to pay $27,667 in restitution.
Susan Hooks, former financial aid director, was sentenced to five years probation and nine months home detention,
and was ordered to pay $18,000 in restitution.
Laura Ross, also a former financial aid director at Edmondson, was sentenced to two and one-half months home
detention and three years supervised release, and was ordered to pay $29,900 in restitution.
Tiki Johnson, a former employee, was sentenced to three years probation and ordered to pay restitution of $3,000.
Melissa Jansen, also a former employee, was sentenced to six months home detention and six months probation and
ordered to pay $15,680 in restitution.
John Neal Davis, a former admissions representative, was sentenced to three years probation and ordered to pay $4,000
in restitution after pleading guilty to one count of SFA fraud.
Our investigation uncovered a scheme by Edmondson employees to defraud the Department of Education by coaching
students to falsify financial assistance applications, altering ability-to-benefit tests, and altering and destroying financial
aid records in an attempt to cover up the fraudulent activity. (Semiannual Report No. 30, page 30)
Jimmie Mack
Chicago, Illinois
Jimmie Mack, the last of the Chicago PLUS fraud targets, pled guilty to two counts each of mail fraud and Social Security
fraud in the Northern District of Illinois. Our investigation determined that Mack, together with Antonio Gaddis,
completed two PLUS applications containing false parental dates of birth, non-existent children, false SSNs for the
children, and false enrollment data. One of the applications resulted in the disbursement of a check in the amount of
$2,885. Mack cashed the check, gave a portion of the proceeds to Gaddis, and used the remaining funds for other than
the specified educational purposes. (Semiannual Reports No. 29, page 21 and No. 30, page 34)
Wayne Edwards
Long Beach College of Business
Long Beach, Califonia
Wayne Edwards was sentenced in the Central District of California to three years probation, ordered to pay $6,444 in
restitution and fined $25 for each of two counts on his conviction for SFA fraud. Our investigation found that Edwards
conspired with Nicole Turner, financial aid officer at Long Beach College of Business, and several other individuals to
submit 25 fraudulent Stafford Loan and Supplemental Loans for Students applications for 14 ineligible student financial
aid recipients who were friends and family members of Turner and Edwards. (Semiannual Report No. 30, page 31)